Australian workers’ productivity drops 3.7% as employment surges and investment slows

Wage growth from higher employment and hours worked without output gains could fan inflation, Productivity Commission warns

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A surge in employment combined with scant investment by firms to improve output triggered a sharp drop in worker productivity, limiting prospects for income growth without fanning inflation, the Productivity Commission said in its annual report.

Across the economy, productivity fell 3.7% in 2022-23, as output growth failed to keep pace with a record 6.9% increase in hours worked, the commission said. A rush by employers to hire new staff was much higher than in previous bursts - the nearest comparison was the 4.3% rise in hours worked in 1988-89.

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